It mostly covers my work as UNISON Scotland's Head of Policy and Public Affairs although views are my own. For full coverage of UNISON Scotland's policy and campaigns please visit our web site. You can also follow me on Twitter. I hope you find this blog interesting and I would welcome your comments.

Tuesday, 28 May 2013

SCDI on economics of the constitutional debate

Given the capacity, and understandable reluctance, of many in the business community to engage in the constitutional debate, today’s Scottish Council Development and Industry (SCDI) survey is worth a read.

While, SCDI takes no political view on independence, the organisation’s role has always been to examine and consider impartially the industrial, commercial and economic challenges and opportunities facing Scotland. Today’s paper, ‘Future Scotland: Future Growth’ is based on extensive interviews with members and a number of larger gatherings.

The report gives a good (if gloomy) overview of the Scottish economy and the long term challenges. On taxes, you might have expected such a survey to have strong views on cutting taxation, but in fact the report states:

“While a stable and affordable tax environment was important to businesses, many respondents were reasonably satisfied with the existing fiscal regime, and would only be seeking marginal improvements. While there were some calls for reductions in taxation rates to assist businesses, including business rates, VAT, national insurance and fuel duties, no particular consensus was detected for a significantly lower tax environment.”

As the latest Scottish Government paper emphasises the benefits of cutting Corporation Tax, again you might have expected this survey to encourage that position. However, it was not a priority for most respondents that Scotland is able to lower its rate below that of rUK. The list of reasons given is interesting:

• The UK’s current corporation tax rate is relatively competitive and is reducing.

•Ireland’s corporation tax rate had been set in a different era, and an independent Scotland may have “missed the boat”.

•A marginal reduction would have some, but not significant, positive impact for an independent Scotland’s economy.

•There is no great desire to participate in a race to the lowest tax environment.

•There is doubt about the extent to which tax competition will be permissible within the EU.

•The rate would have to be sustained over a reasonable timeframe, and avoid any sign of volatility, to be credible to potential investors.

•Many respondents raised questions about how a competitive corporation tax would be funded, and acknowledged that the benefits would depend on the wider package of the prevailing business environment – e.g. it would have no real benefit if the result was that Scotland could not afford to maintain competitive infrastructure.

•Corporation tax was not the sole reason for locating business – decisions also took account of physical infrastructure, access to raw materials, skilled labour etc.

•It was pointed out that global enterprises have in-built systems for ensuring tax efficiency, and that the funds going to a Scottish exchequer from corporation tax would not necessarily be large-scale.

•The headline rate is only one consideration – tax certainty and allowances are also important factors

Even more encouraging was that, “most respondents articulated the desirability of a wider business environment that ensures we can invest appropriately in good infrastructure, skills and education to support the economy’s long-term needs.”

Sectors that rely on the wider GB market were not keen on creating new barriers, although few indicated that the current debate was having a marked impact on investment decisions. The economic climate was much more significant. The emphasis was on long term stability, “relative uncertainty can jeopardise decision making.”

While respondents had mixed views on the new Scotland Act and greater devolution in general, the overwhelming view was, “it is not the powers, but the policy decisions that will count”. Hard to disagree with that as the Red Paper and UNISON Scotland consistently argues the same point.

There was a clear preference for a monetary union with the rUK but, “Numerous respondents voiced reservations about how well an independent Scotland would fare in negotiations post-referendum, and thought there was a reasonable probability that an independent Scotland’s influence could be weakened. Some respondents also questioned whether such an arrangement would in fact negate the idea of Scottish independence, and considered that an independent Scotland should have its own Central Bank”. There were also concerns about Scotland’s credit rating and the impact of speculation.

Unsurprisingly, SCDI and the respondents value impartial information from within and outwith Scotland. They also urged that their contributions should be listened to and not shouted down by one side or another. The latter may be more challenging!

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About Me

I am the Head of Policy and Public Affairs at UNISON, Scotland’s largest trade union.
I am a Board member at the Reid Foundation and Keir Hardie Society. Secretary of the Socialist Health Association Scotland. Past Chair of the Scottish Labour Party and SEC member.
Graduate in Law from University of Strathclyde. Fellow of the RSA.
I edit Utilities Scotland and Pensions Scotland and also regularly blog at Public Works, Red Paper, SHA Scotland and Revitalise Scottish Labour.